Levendary Cafe Case Study Solution is a case from HBR. The Original Case is named as Levendary Cafe: The China Challenge can be analyzed from the view point of Globalization, International management, Foreign expansion and understanding cultural norms for business expansion. In this comprehensive post we cover the 4 Core elements of the case, ranging from introduction to proposed short term solutions for the business. Here is a summary of the Levendary café: the china challenge case analysis
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Levendary Café: Case Introduction
Just a few weeks after beginning her role as CEO of Levendary Cafe, an American-based fast food chain with a valuation of $10 billion, Mia Foster was confronted with a huge challenge at the company. Mia was a beginner in the role of international management and lacked prior experience in the field.
Concerned that the company’s extensive breakthrough into the Chinese market may stray unduly from Levendary’s established principles of store layout and menu offers, a number of Levendary’s corporate executives have expressed fear on the company’s substantial foray into the Chinese market. They cite their worries as the reason for their apprehension. Foster has experienced organisational frustration as a result of what he perceives to be Louis Chen’s reluctance to comply to the company’s planning and reporting standards.
Louis Chen is the President of Levendary China. In the meantime, the financial data suggests that Chen’s efforts have resulted in fruitful consequences, and it also suggests that his understanding of China is superior to that of the headquarters in the United States. Chen, who displays entrepreneurial traits, has shown a reluctance to engage in conversations with Foster and other individuals regarding the corporate strategies for China. These conversations pertain to China as a market for the company’s products and services.
While Foster is getting ready to leave for China to meet with Chen, she is faced with a crucial decision that will have a big effect not just on the future of Levendary China but also on the globalisation initiative as a whole. Specifically, she needs to figure out whether or not she is capable of properly managing Chen, and if she is, she needs to figure out what techniques she should utilise in order to do so.
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Levendary Café : Evaluating Entry into China
The Levendary Café differentiates itself from its competitors in the quick-casual restaurant industry by offering a number of significant advantages over its contemporaries. In addition to providing nourishing soups, salads, and sandwiches produced with ingredients of the highest quality, they are committed to providing exceptional customer service in an inviting atmosphere.
In addition, Levendary Cafe distinguishes itself by its willingness to take risks, as evidenced by its provision of organic food and its expansion into uncharted territories such as China. The Metro China/Beijing Embassy sites of Levendary Café had annualized sales of slightly less than $1 million in 2010, while the Metro-suburb China/Shanghai Koreatown locations had annualized sales of little more than $250,000; nonetheless, the company as a whole saw a loss of revenue in 2010.
Levendary Cafe Case Study Solution: Louis Chen Leadership
Levendary Café joined the Chinese market and had extraordinary success under the leadership of Louis Chen, Vice President of Chinese Operations. This expansion resulted in the opening of 23 additional sites in China in a period of less than one year. As a result of Levendary Café’s rapid rise in China, traditional Chinese restaurants began deviating from the norm in terms of both the appearance and content of their menus.
The fact that typical Levendary menu items are either hard to come by or not offered at all at certain Chinese locations is what differentiates Levendary from other quick-casual restaurant chains in the market. For example, the Levendary Café serves nourishing soups, salads, and sandwiches, but its Chinese eateries no longer offer salads or their famous cheese soup; in their place, they sell dumplings and a Thai vegetable soup. ]
The café’s appearance has likewise deteriorated, and it no longer has a consistent theme. In some locations, the sole seating option is a counter, while in others, the comfortable, classic chairs with oak frames and padded seats that give the impression of a high-quality establishment have been replaced with more affordable plastic chairs.
They are having trouble differentiating themselves from other native Chinese cafes that also serve dumplings by offering delicacies that are popular in China as a result of the lack of uniformity in both their menu and their outer look. This is because neither their menu nor their presentation is consistent. Levendary Café’s customers have grown to expect a certain level of coziness and culinary excellence from them, but the variability of the menu and the lack of uniformity in the café’s design are having an adverse effect on the company’s branding as well as these aspects.
The fact that Levendary Café distinguishes itself from its rivals in the market for quick casual restaurants by offering nutritious meals in warm and inviting environments contributes to the popularity of the company as an American brand. In spite of the fact that uniformity is essential for branding and image, some menu customization is encouraged in order to cater for regional tastes. For example, the Northeastern United States’ fondness of turkey and cheddar cheese is a regional preference that should be accommodated. Customization helps improve customer service by individualizing the menu for each client, and if Levendary Café is able to maintain its commitment to providing healthful food, the restaurant will be successful in China.
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Levendary Cafe Case Study Solution: Lack of Standardization
Companies who own and manage their own cafes are the only ones that have been successful in expanding their businesses into China. Franchising accounts for two-thirds of all cafés in the United States. The market experience of the franchisee is one of the advantages of franchising, along with the company’s capacity to control its image through standardization.
This is accomplished by enforcing brand and operational standards on franchised units, which the corporation then controls. Due to the absence of franchising, a problem has arisen since Chen, who oversees the entire Chinese organization and is responsible for very little or none of the American operations, lacks responsibility. Additionally, prior to joining Levendary, Chen had no experience in the restaurant industry; rather, he had experience in the real estate industry. Levendary reaped the benefits of his knowledge in real estate by enabling him to acquire prime locations in China at prices that were within his budget.
Due to his lack of experience in the restaurant and franchising industries, in addition to his ignorance of branding and image, it will be difficult for the cafés to be successful in China. His lack of competence is made worse by the fact that he works independently with a lot of latitude, without aid from the corporate headquarters and without appropriate accountability to them. His lack of expertise is made worse by the fact that he is working independently with a lot of leeway.
The fourth issue is the danger that the company faces as a result of its reliance on financial reporting. Because Chen does not adhere to GAAP, it is possible that his financial reports are not accurate or that they cannot be compared to activities in the United States. The failure of a publicly traded firm to comply with GAAP may also result in regulatory problems for the company, which may result in a decrease in the value of the company’s shares.
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Levendary Cafe: Suggestions for Improvement
Mia is responsible for developing a strategic plan for China that is in line with the organization’s overall corporate identity. Since Chen’s participation in the formulation of this strategy is essential to its success, it is wise to give him a hand in the process. It is dependent on Chen’s backing for Mia to be able to exert control over him and make him answerable for his actions.
The utilisation of franchising should be the primary goal for the company’s expansion in China in order to be congruent with the founder’s original vision for China and Levendary’s flourishing experience with franchising establishments in the United States. This would make the company’s expansion in China the primary target. Through the implementation of this step, the organisation will be able to manage its image and keep its operational procedures constant.
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Lucien, the Chief Concept Officer, is in charge of approving any culinary customizations offered by the franchisees to guarantee that they adhere to the company’s quality and wholesomeness requirements. The franchisees are given the opportunity to offer their suggestions regarding the customization of the menu.
Chen is responsible for the establishment of a total of 23 coffee shops throughout China, which later served as the basis for the establishment of franchises.
It is essential, before to beginning the process of franchising, to build a consistent brand for the cafes by standardising their appearance in a way that is congruent with the image of the corporation based in the United States.
It is necessary for Chen to work along with the Chief Concept Officer in order to develop a standard menu that can be used throughout all of the Chinese restaurants while still making certain allowances for regional tastes through limited personalization. In addition, it is essential to keep the store appearance the same throughout all 23 sites in order to stay in line with the marketing strategy of promoting natural and healthy products.
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Modifications need to be implemented right away in order to accomplish this goal. The Denny’s expansion model is one that is being considered for use by Levendary in China. This model calls for the modification of the restaurant’s menu while maintaining its distinctive appearance and flavour profile. Given the significant range of preferences present among Chinese customers, this strategy would be the most effective one to take.
Nevertheless, American brands maintain a substantial allure, and a uniform store style can effectively sustain brand identification in the long run. The enormous middle-class population of China is the major target market for this approach, despite the fact that it could potentially cause confusion for American tourists who are in China and who anticipate a menu that is catered to the American palate. In addition, the menu that is being provided to customers in China may not be to their liking if it is being offered in the United States.
Mia will need to make some adjustments to the organisational structure of the company before she can put this strategy into action. Even though Chen reports to Nick White, the Chief Operating Officer, at the moment, the effectiveness of this arrangement is not nearly as good as it could be. It has been suggested that Chen report to Peter Steele, the Chief Franchise Officer, due to the fact that China presents an uncharted opportunity for the business to expand its franchise offerings.
The goal of Peter’s strategy is to contribute to the expansion of the company’s brand in the region by standardising the cafés in China. This would be accomplished by giving the establishments a unified aesthetic and providing Chinese food options on the menu. In addition, the person has a wealth of experience working in franchise operations, and when combined with Chen’s knowledge of the Chinese market, they have the potential to establish a highly effective relationship.
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Mia has been entrusted with the responsibility of formulating a strategic plan for China that is in line with the organization’s overall corporate brand. In light of the significance of his assistance, it is strongly suggested that Chen be included in the process of developing this strategic plan. Cooperation from Chen is essential to Mia’s ability to exercise authority over him and make him take responsibility for his actions. The implementation of franchising should be the major objective of the company’s plan to grow into China.
This should be done so because it is in line with the founder’s original vision for China and because Levendary has a proven track record of being successful in establishing franchises in the United States. The implementation of this measure will assist the organisation in efficiently controlling its public perception and establishing uniformity in its operating protocols.
This will be made possible as a result of the deployment of this measure. The Chief Concept Officer, Lucien, is in charge of reviewing any suggested food customization made by franchisees to ensure that it complies with the set standards of quality and wholesomeness. This obligation falls squarely on Lucien’s shoulders. Franchisees are given the opportunity to provide their input regarding the modification of the menu, and this opportunity is extended to them.
Chen has developed a total of 23 coffee shops within China, which serve as the essential basis for the formation of franchises. These coffee shops serve as the basis for the establishment of franchises.
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Short Action Plan for Continued Growth in China
At the outset, it is essential to design a standardised menu consisting of key menu items that are tailored to the requirements of the Chinese market. It is recommended that all Chinese locations provide the main goods, with the option of allowing approved adaptations to cater to variations in regional preferences for certain flavours.
The success of the establishments located in Metro China and the Beijing Embassy ought to be given priority on the menu. These locations have a somewhat higher price range for their menu, which results in a higher revenue per customer in contrast to the Metro-suburban China retailers. The menu ought to prioritise the success of these locations.
Second, it is strongly suggested that the appearance of the store be standardised throughout all of its locations. This will ensure that Chinese customers can anticipate the same level of comfort at each site. It is not possible to make use of the storage units if they do not fit in with the desired image or model of the organisation. The third phase is to determine a growth target that is realistic and attainable for the upcoming year in China.
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This step should place an emphasis on maintaining normal operations while also identifying prospective additional store locations. The upcoming expansion should give top priority to the targeting of prime places that have a sizeable Chinese population that falls inside the middle class category. The development of a franchise model that is appropriate for the Chinese market constitutes the fourth step in the process.
Because of this, the support that is offered to Chinese franchisees will need to be customised, particularly in areas like training, marketing, and message. In the end, put into action the development of customary communication of Chinese undertakings to the central office of the United States, which will need financial statements prepared in accordance with Generally Accepted Accounting Principles (GAAP), in addition to audits, budgeting, and strategic planning.
In order to guarantee that franchise businesses are operating in accordance with the criteria that have been set forth, it is recommended that corporate management take a more hands-on approach while supervising franchise operations. It is anticipated that the successful execution of this planned course of action will result in a beneficial conclusion with regard to the company’s entry into the Chinese market.
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